When I was 16, all I wanted was the latest Jordans and a car to drive. Twenty years later, I’d rather have money saved in the bank than the latest gadget. A 2012 study by CreditDonkey.com found that nearly half of all Americans have less than $500 saved in the bank. The true numbers are probably worse than that. Why is this a problem? When emergencies happen, and we’ve all seen what Mayhem can do, you’ll have to charge up your credit cards or take out a high interest loan to get by. In his book, The Total Money Makeover, Dave Ramsey suggests that a fully funded emergency fund covers three to six months worth of income. If you don’t have any money saved, three to six months of income sound like a crazy number to get to. It’s not. You have to start with baby steps. That’s why Ramsey suggest that you start with a goal of $1,000. Here are three ways to get you to that goal in one year.
Just Do It
So if you do the math, $20 per week gets you to $1,040 in 52 weeks. If you get paid biweekly, that’s $40 out of each check. If you get paid semimonthly it’s $42 per check. What, I want you to just be disciplined and save the money? Yeah, just do it!
Brown Bag It
My wife and I eat out way too much. There are a lot of excuses that make us think it’s ok to spend the money. Whether it’s, “I’ve got a busy day and don’t have time to eat at home,” or my personal favorite, “I’m hungry,” we justify eating out pretty easily. If you’re eating fast food, you’re spending your $20 in three meals. If you’re sitting down to eat at a restaurant, you’re over $20 in two meals when you factor in the tip. So if all we need to do is save $20 per week, stop eating your money and start saving it. Make your lunch three days a week and 52 weeks later, you’ll be sitting on a grand in the bank.
Cut The Cord
I think sports fans will have the toughest time with this option. Trust me when I tell you that keeping track of your team is not as important as staying out of debt. Cut the cord and follow your team online. You can also buy a Roku or Apple TV and subscribe to a service like Hulu. You can watch most of the shows you watch on cable at a fraction of the cost. I know it’s a sacrifice. So what’s the payoff? You’ll save $80 – $100 per month and $1,000 in 12 months. If you want to turn the cable back on after that, go for it.
Saving isn’t easy but it’s necessary. Not having an emergency fund can ruin your credit and makes buying a car or house a lot more expensive because of higher interest rates. Have you downsized in some areas in order to save money for an emergency fund? Let us know about it in our comment section and we’ll include them when we update this post.